Discover it® Credit Card Review – 5% Cash Back Rewards

Despite being popular among college students and consumers interested in cash back benefits, the now discontinued Discover More card did have a couple of minor downfalls, including the fact that you could only earn 0.25% cash back on the first $3,000 spent outside of bonus categories. The Discover it® Card just may provide solutions to these issues while still hanging onto one of the greatest benefits of the Discover More card: 5% cash back rewards.

At first glance, the “it” card may seem to have addressed all the disadvantages of its predecessor – but is it in fact the ideal cash back card, or are we looking at yet another credit card that has its own unique set of flaws?

Key Features

Up to 5% Cash Back Rewards. The Discover it card rewards up to 5% cash back, based on a rotating rewards calendar. For example, in 2014, the October-to-December quarter offers a 5% cash back bonus on up to $1,500 in online shopping and purchases at department stores. All purchases outside of these quarterly “specials” earn an unlimited 1% cash back, which is also applied once you spend over $1,500 in each category.

Fees. There is no annual fee for the Discover it card, and balance transfers are charged 3% of the transfer amount. There is no late payment fee the first time you pay late, but after that the fee is $35. There is also no foreign transaction fee – a step up from the Discover More card, which carried a 2% foreign transaction fee at one point.

Introductory APR. The Discover it card provides a 0% introductory APR for 14 months on both purchases and balance transfers.

Low APR. After the introductory period, the APR ranges from 10.99% to 22.99%, depending on credit worthiness and fluctuations in the prime rate. There is no penalty APR on late payments.

Free Access to FICO Credit Score. You receive complimentary access to your FICO score online and on your monthly statements to help you keep track of your credit.

Advantages

0% Introductory APR. The 14-month, 0% introductory rate on both purchases and balance transfers is one of the lowest and longest available rates for new cardholders.

Few Fees. The Discover it card carries almost no fees. There is no late fee for the first late payment, no penalty APR on late payments, no overlimit fees, and no annual fee.

5% Cash Back Reward Rate. The ability to earn 5% cash back on rotating purchases is one of the greatest advantages of the Discover it card, and the new 1% cash back option on all other purchases is a much-needed improvement over the 0.25% earned previously with the Discover More card. For comparison, the Chase Freedom card offers a similar program with 5% cash back on rotating categories and 1% on all other purchases, but it charges a foreign transaction fee of 3%, as well as a penalty APR of 29.99%. The Capital One Cash Rewards card offers 1% cash back on all purchases across the board (though offsets this with a year-end bonus of 50% of cash back earned throughout the year). The Citi Dividend Platinum Select Visa card offers 5% on rotating categories as well, but you can only earn 1% cash back up to $300 per calendar year on all other purchases as opposed to the Discover it card’s unlimited 1%.

Earn More Rewards With ShopDiscover. ShopDiscover is the Discover card’s online portal which includes over 200 top online retailers from Bath & Body Works to Walmart. If you use ShopDiscover, you can earn anywhere from 5% to 20% cash back when shopping online with certain retailers simply by logging into the ShopDiscover portal first, and then choosing the retailer’s web site. ShopDiscover also provides a number of travel deals such as cruises and resorts that are eligible for cash back rewards.

Easy Redemption of Rewards. There are a number of fairly simple ways to redeem cash back rewards. Although rewards can be redeemed for cash or a statement credit, other options, such as redemption for partner gift cards, provide an opportunity to increase and sometimes double the cash back rewards. These partner gift cards can be selected from over 150 top retailers including Lowe’s, Red Lobster, and Macy’s.

Donate Rewards. You have the option to donate your rewards to charity. Discover also makes an additional annual donation to whichever charity receives the most cardholder donations.

Minimal Redemption Requirements. There are very few requirements for most of the redemption options. For example, partner gift cards and Discover gift cards start at $20, and direct deposit and statement credits start at $50. However, there is also the option of using the cash back bonus to make payments with certain online retailers such as Amazon, iTunes, Facebook, and various online gaming sites, which allows redemption without a minimum requirement.

Disadvantages

Rotating Categories. Although common in the world of cash back credit cards, rotating categories can require a lot of pre-planning. Additionally, with Discover it, you have to actually sign up each quarter, and while it’s a fairly simple online process, there is always the chance you might forget before making purchases. Plus, you may find it easier to not deal with specific categories every quarter, preferring instead a general cash back rate on all purchases. One problem with the rotating categories is that they are fairly specific. For example, while the Discover it card has a category solely for “home improvement,” the Chase Freedom card bundles home improvement with a few other categories including restaurants and movie theaters.

No Sign-up Bonus. Many cash back rewards cards offer introductory bonuses, but not the Discover it card. The Chase Freedom card, for example, offers a $100 bonus after spending $500 in the first three months, and the same is true with the Capital One Cash card and the Citi Dividend Platinum Select card.

Expiration of Cash Back Bonuses. You can lose your cash back bonuses if you are inactive for 18 consecutive months or if you skip a minimum payment for two consecutive billing periods. This is not a card that you want to let sit for years in your sock drawer, especially if you’ve earned cash back and have not yet redeemed it.

Still Not Accepted Everywhere. Although the elimination of foreign transaction fees is a great benefit of carrying the card, Discover is still not accepted everywhere domestically or overseas. For cardholders who travel frequently to Africa, the Middle East, many parts of Asia or Australia, and other areas where Discover isn’t often accepted, the lack of a foreign transaction fee is likely not going to matter.

Final Word

The decision of which cash back credit card to choose lies squarely in the categories that earn the most cash back. If you can plan ahead, sign up each quarter, and pay close attention to your purchases, you’re likely to find that earning cash back with the Discover it card is a snap.

However, if you don’t consider yourself as attentive to such things as you should be, you could easily find yourself missing out on cash back opportunities (either leaving maximized rewards to fate or falling back on 1% rewards for all other purchases). In this case, you would likely be better off with a card that earns a lower rate but covers everything, or at least does not rely on rotating categories to earn rewards.

Verdict

Discover it® is a great credit card which provides numerous ways to earn cash back and presents just as many ways to redeem and spend those rewards. If you’re diligent in selecting where you make your purchases and you take the time to plan shopping trips, you can earn a significant amount of cash back with this card. On the other hand, if you prefer to just “shop and go,” you may find yourself unable to maximize the card’s earning potential.

Score

4.3 stars out of 5: There is no sign-up bonus, and extra management of card spending is required in order to maximize reward potential. The 14-month, 0% introductory APR on purchases and balance transfers, as well as very few fees, make this card a solid choice for those carrying a balance who also have the diligence to deal with rotating categories.

Editorial Note: The editorial content on this page is not provided by any bank, credit card issuer, airline, or hotel chain, and has not been reviewed, approved, or otherwise endorsed by any of these entities. Opinions expressed here are the author's alone, not those of the bank, credit card issuer, airline, or hotel chain, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Christina MajaskiChristina Majaski has written for online and print publications since 2003 on topics related to personal finance, legal matters, parenting, and careers. She lives in the Minnesota tundra, where in her free time she enjoys reading, writing, interacting via social media, and hanging out with her daughter.

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